A Rendezvous With Compounding Quality- Part II

Glimpses into the mental models and techniques that underpin his success

“Those who keep learning, will keep rising in life.”- Charlie Munger

“The true scarce commodity of the near future will be human attention.”- Satya Nadella

The arrival of a new year inspires billions of people to craft resolutions crammed with ambitious goals they dream of achieving. It makes perfect sense: a new calendar year symbolizes a fresh start, a chance to become a better version of oneself. Predictably, sales of fitness equipment surge in the first few weeks of each year. Gym memberships skyrocket. People embark on various diets, aiming to shed a few extra pounds or transform into the best shapes of their lives. All seems promising, at least for a while. However, as the daily grind resumes and reality sets in, these resolutions often fade into mere wishful thinking. Sadly, this isn’t unique to New Year’s resolutions. Consider your childhood or adolescent dreams. How many of those have you turned into reality? For many, the spark of ambition dims soon after completing formal education and starting their careers. Why does this happen? Is it the responsibilities of marriage and parenthood? Or perhaps the sting of past failures dulls our appetite for risk and adventure? Honestly, I’m not sure, but these questions linger in my mind.

Every year on December 31st, I sit down to review the goals I set for the year. I comb through my notes, marking checkpoints or crossing out incomplete tasks, and then I compose a new list for the year ahead. Writing goals down is a proven method to boost accountability and maintain momentum. But to succeed, I must get creative and outsmart my naturally lazy brain. One of the simplest ways I remain focused on my goals is by drawing inspiration from friends and individuals I admire. The logic is straightforward: if they can do it, what’s stopping me? To that end, I immerse myself in inspiring books and articles, watch motivational videos, and exchange ideas with mentors and role models.

In March of last year, I published a piece based on a conversation with Pieter Slegers, the founder of Compounding Quality. Pieter is an extraordinary individual whose hard work and thoughtful writing have earned him admiration from hundreds of thousands of investors worldwide, including legends like Bill Ackman, Chuck Akre, Guy Spier, Francois Rochon, and others. On December 30th, 2024, Pieter graciously answered my questions, offering a deeper glimpse into the mental models and techniques that underpin his success. It is with great pleasure that I now share an abridged and slightly adapted version of our dialogue.

PK: Pieter, the late Charlie Munger once said: “It's so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, and do a lot of deferred gratification. If you do all those things, you are almost certain to succeed. If you don't, you're going to need a lot of luck.” Yet, it amazes me how many people fail to follow this advice. As someone who embodies success and achievement through discipline and hard work, why do you think most people struggle to realize their full potential?

Pieter: Answering this question is both a privilege and a challenge. In my view, the famous adage that holds the answer is: “Easy decisions make for a hard life, and hard decisions make for an easy life.” Life, much like investing, revolves around the principle of delayed gratification. It’s a simple yet profound truth. If you’re genuinely passionate about a subject and dedicate just one hour each day to learning it, over the course of a year, you’ll likely surpass the knowledge of 99% of people worldwide in that area. It all comes down to consistent effort. Even ordinary individuals can achieve extraordinary outcomes by committing to the daily grind over time.

Equally important is loving what you do. The success of Compounding Quality wouldn’t have been possible without my genuine enthusiasm, or, as I like to call it, a positive “obsession” for reading, researching, writing, and engaging with thousands of like-minded individuals. Passion is an unparalleled motivator, and I’ve been fortunate to channel it into my work effectively.

Many people, however, fall short of their potential because they cling to their comfort zones and shy away from new experiences. True living, and indeed personal growth, begins at the edge of that comfort zone. For me, embracing a growth mindset has been transformative. I often reflect on Thomas Edison’s famous words when asked about his 1,000 “failures”: “I didn’t fail 1,000 times. I simply found 1,000 ways that didn’t work.” Success, in my opinion, lies in perpetual learning, embracing challenges, and staying committed to one’s goals.

PK: Pieter, you highlighted so many crucial points, and I completely agree that fear of failure and embarrassment are significant barriers for many in today’s world. Staying within one’s comfort zone feels undeniably appealing, but that sense of comfort can be dangerously deceptive. It acts like a narcotic, sedating us with a false sense of control over our lives and destinies. Meanwhile, every missed opportunity for adventure or growth subtly erodes our self-confidence and leaves us more vulnerable to life’s inevitable uncertainties.

At the same time, it’s easy to perceive humanity’s greatest achievers as almost superhumans seemingly immune to doubt or discouragement. But the reality is far more relatable: everyone struggles at times, feeling lost or disheartened.

I’m curious, do you ever experience periods when your passion wanes, or your drive diminishes? If so, how do you navigate those moments of doubt or distraction? What strategies help you recharge, reignite your focus, and regain your momentum, metaphorically speaking?

Pieter: This is yet another thought-provoking question, and my answer to the first part is an unequivocal “yes.” Like everyone else, I experience struggles, uncertainties, and pains. That said, because I genuinely love what I do, my motivation rarely takes a significant hit. However, there are occasional days when I’m tempted to hit the snooze button for a bit more rest or spend the evening watching Netflix with my girlfriend instead of tackling the next article or investment case. During those moments, I remind myself of the power of small, consistent growth. This mindset helps me return to my daily rhythm.

Another strategy I use is to reflect on the progress of Compounding Quality. While I still view it as a fledgling project, I take immense pride in the support of my dedicated followers and readers. Recognizing the trust they place in me instills a sense of responsibility, even a moral obligation to continually improve and give my best effort.

Journaling is my third go-to tool during challenging times. I document the highs and lows of each day, noting my progress or setbacks. I also set weekly, monthly, quarterly, semi-annual, and annual goals to streamline my thoughts and maintain a clear sense of direction. This practice not only enhances my time management but also allows me to step back and see the bigger picture.

Of course, I accept that not every day will be filled with rainbows and unicorns. Struggles and setbacks are natural and even necessary for growth. Instead of letting them discourage me, I choose to view them as part of the journey. Two sayings often cross my mind in such moments. The first is “Life is 10% what happens to you and 90% how you react to it.” The second is, “Happiness is reality minus expectations.” To that end, I strive to manage my expectations wisely, keeping them realistic and grounded.

PK: In “The Almanac of Naval Ravikant” there’s a line that I find very intriguing: “When you're finally wealthy, you'll realize it wasn't what you were seeking in the first place.” How do you interpret these words?

Pieter: Before sharing my interpretation of Naval’s words, I’d like to explain how I approach life through a regret-minimization framework. For every major decision I face, I rely on two guiding questions: “Will this outcome matter 30 years from now?” and “Will my 80-year-old self be proud of this decision?” These questions anchor my decision-making process and help me tackle one of life’s greatest challenges, which is finding the right work-life balance. While I’m far from perfect at it, I believe this is a skill that improves with time, and I remain optimistic about my growth in this area.

As for Naval’s words, I believe his message isn’t about the accumulation of money or wealth but about the deeper, more meaningful aspects of the journey. It’s the character traits we cultivate and the life lessons we gain along the way that truly matter. These intangibles, in my opinion, far outweigh any material success.

PK: James Clear once said: “Decide the type of person you want to be. Prove it to yourself with small wins.” Your journey of building Compounding Quality into what it is today is remarkable. Did it start as a small dream that grew over time, or did you have a clear vision from the beginning?

Pieter: If someone had told me two years ago that by the end of 2024 the Compounding Quality community would boast more than 380,000 subscribers, I probably would have dismissed them outright.

When I started this project, my only aim was to have fun and share my opinions on various investing topics whenever the mood struck me. It all began on a lazy Friday night. I was bored, so I created a Twitter account. What most of my readers don’t know, however, is that for the first two or three weeks, my tweets went unnoticed- no likes, no comments, no engagement. Everything changed when Gautam Baid recommended my account, and that’s when my journey truly began. In that sense, luck played a pivotal role. Under different circumstances, I might have abandoned the project entirely and focused on my corporate job. In those early days, I dreamed of reaching 10,000 subscribers. It felt like an ambitious goal. Then it grew to 20,000, 50,000, 100,000, and beyond. With each milestone, my vision for Compounding Quality has evolved and expanded. More importantly, it continues to grow and adapt, driven by new possibilities and insights.

Reflecting on James Clear’s quote, I agree that success requires 5% talent and 95% hard work. Finding your dream job is a rare privilege, and I often remind myself of how fortunate I am. This gratitude fuels my passion, which in turn keeps Compounding Quality alive and thriving. For instance, today I’ve already spent 13 hours in the office, and I’m still not done! (laughs).

PK: Can you please share some big lessons this past year has taught you. Did it change your thinking in any significant way?

Pieter: Over the past year, and particularly during the first few months, my entire focus was on Compounding Quality. I treated everything else as a distraction, an annoying “noise” that I needed to block out. Unfortunately, this single-minded dedication came at a cost: my personal life suffered greatly, forcing me to reevaluate my priorities. One solution was to rent a small office space where I now handle all my work-related tasks. This separation has been a game-changer. When I leave the office, I turn off my phone and devote my time to my family, my girlfriend, my friends, and my other interests. Creating that boundary has brought much-needed balance to my life.

Another valuable lesson I’ve learned is the importance of networking with people who are smarter and more experienced. In that regard, I’ve been working on building an inner network of industry professionals and individuals I admire. Imagine reaching out to five people you hold in high regard, inviting them to discuss a topic or inquiry over dinner. Even if you don’t have much to offer personally, the opportunity for them to meet and exchange ideas can be reason enough for them to accept. Creating these connections is a rewarding way to grow both professionally and personally.

A third lesson is about frugality- it’s a virtue, but it has its limits. For instance, when buying a birthday gift for your Mom, it’s ridiculously to nickel and dime. You don’t have to max out your credit card on something extravagant, however, showing generosity for the people you love and care about is more than okay- it’s important. The same applies to treating your girlfriend to a nice date occasionally. As we discussed earlier, life is about so much more than the number of digits in your bank account.

PK: 2024 has been a spectacular year for your project and Substack account. Do you have any big plans for 2025? Are you considering writing another book, either with Luc Kroeze or on your own?

Pieter: First and foremost, my plan for 2025 is to focus on steady, incremental progress day by day, week by week, and month by month. Consistency remains the cornerstone of my approach.

Secondly, indeed, I’ve been contemplating writing my own book to share my personal insights and experiences. As you know, “The Art of Quality Investing” is primarily Luc’s work. Publishing a book by 2025 feels overly ambitious, so I’m setting my sights on 2026 as a more realistic target.

Lastly, my major goal for the new year is to launch my own equity investment fund in early September. The fund will adopt Warren Buffett’s 0-6-25 fee structure: if the fund underperforms, investors pay no fees; if it outperforms the index, a 6% fee applies, with 25% of those fees donated to charity. This structure aligns with my values, emphasizing both fairness and a commitment to giving back.

PK: Pieter, it’s always a privilege to connect with you, whether in person or online, and exchange thoughts and ideas. I cannot thank you enough for taking time out of your busy schedule to answer my questions. I suppose our next rendezvous in person will be in Omaha next May. I already look forward to the trip and the excitement and cherished memories it will bring. Wishing you and your family an exceptional 2025! Also, best of luck with the launch of your fund in September. I have no doubt it will be yet another remarkable success story!

Thank you for reading my first post for 2025! I hope that you found some valuable insights in my conversation with Pieter. If you don’t follow him yet, here is a link to his Substack account:

Until next time! Take care!

Pavel (PK)